legal obligations in construction

1. You are a Contractor who is concerned that the Project Manager/Contract Administrator has been off sick a lot recently, and that the interim certificate may be issued late this month. Any late payment will have serious implications for your company’s cash flow.

a) i) With reference to the ‘Construction Act’ (Housing Grants, Construction and Regeneration Act 1996): Critically discuss what the Act states with regards to payments in the construction industry. (12 marks)

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ii) With regards to payment, discuss how and where the Act is implemented in NEC3 ECC or JCT SBC/Q. In your answer include reference to the contractual payment procedure, include clause numbers as appropriate. (8 marks)

b) Summarise the timetable for the interim payment process, use a diagram to aid your explanation if appropriate. Your answer should include reference to due date, interim certificate, application, payless notice and final date for payment. (8 marks)

c) Acting as Contractor in the above scenario, discuss what the Law and the Conditions of Contract allow you to do to minimize any delay to payment. In your answer include reference to clauses if appropriate. (5 marks)

a) Bert wanted an extension to his house built. On May 1st he placed the following advertisement in a local newspaper: “Contractor wanted for extension work. Will pay £40,000. Ring 078 2161

Bert received calls from three contractors, Adam, Chas and Den, and he sent them all a specification for the work.

On May 5th, Adam told Bert that that he would to do the work for £50,000 but Bert said that was too much. Adam then said “OK, I’ll take £45,000.” Bert said “I’ll think about it”, but he told Adam the next day that he was rejecting his proposal.

On May 6th, Chas, who was Bert’s brother in law, told Bert, “I might be able to do the work for £40,000.” Later that day, Bert told Chas that “You can have the work” but Chas said that he was no longer interested.

On May 7th, Den said he would do the work for £42,000, starting on May 20th and finishing by June 30th. Bert said he would consider Den’s proposal. Bert later phoned Den, saying, “Can you finish by June 25th?” Den said that he could not guarantee this, whereupon Bert said, “OK, I agree to your terms.” Den told Bert that he did not want the work.

Discuss and explain your reasoning as to whether Bert has made a contract with:
(i) Adam (5 marks)

(ii) Chas (8 marks)

(iii) Den (10 marks)

b) Zak owned land on which he decided to build a block of flats. On April 1st, Zak invited tenders for the work. Callum submitted a tender agreeing to carry out the work shown on Zak’s tender documents for £5M. On April 30th, while Zak and Callum were still negotiating terms, Zak asked Callum to commence the work as shown on the documents. Callum carried out some of the work, but on July 1st it became clear that the parties would never be able to reach a final agreement.

i) Discuss whether Callum is entitled to be paid for the work he carried out and on what basis. (7 marks)

ii) How would your answer differ, and why, if Zak and Callum reached a final agreement on July 1st? (3 marks)

3. A contract to construct a basement extension in an inner city location has not gone well. Ground conditions were not as indicated from the ground information provided by the Client. As such the programme has suffered delays which have had a significant effect on cost. The Contractor has had several discussions with the Contract Administrator/Project Manager stating the problem, and identifying the fault to be with the Clients information. The CA/PM disagrees, stating that a competent Contractor would have interpreted the data differently and carried out his own supplementary ground investigation. It is likely that this will result in a formal dispute. Using the example given above:

a) Provide a detailed discussion of the Dispute Resolution Mechanism under JCT11 Standard Building Contract. In your answer include reference to clauses if appropriate. (17 marks)

b) Compare and contrast dispute resolution mechanisms under JCT11 SBC and NEC3 ECC. In your answer include reference to clauses if appropriate. (16 marks)

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